Newbuilding contracts

Transfer of title

When does title in the ship pass from the shipbuilder to the shipowner? Can the parties agree to change when title will pass?

The contents of the shipbuilding contract (including passage of title) will depend on what the shipbuilder and the shipowner have agreed. Very often, a standard form contract in international use will be adopted as the basis of the shipbuilding contract, with the parties making the necessary modifications to suit their needs.

The parties may and often do agree that title to the vessel passes to the shipowner with the physical delivery of the vessel and supporting documentation, including the builder’s certificate, the bill of sale, or both, to the shipowner. Otherwise, the parties may agree that the shipowner acquires ownership as the work progresses or as instalments of the price are paid.

Maltese law does not contain any specific provisions regulating shipbuilding contracts.

If a shipbuilding contract is taken as being similar to a contract of works, where the builder supplies the materials and in the event that the thing had to perish before it is delivered, the loss is borne by the builder unless the employer has been in default in delay for receipt of the thing (article 1634 of the Civil Code). Thus, title to the ship would only pass once its building is complete. In the case of a work consisting of several pieces, the work shall remain at the risk of the builder until the employer has examined the whole work, unless the parties have agreed that each part be examined as soon it is completed (article 1637 of the Civil Code). This reinforces the theory that title (together with risk) would pass upon delivery of the item.

By virtue of a recent amendment to the Civil Code provisions regulating the contract of sale, a provision has now been inserted to the effect that any agreement relating to the sale or purchase of ships shall be governed by the terms and conditions agreed by the parties as well as by the international usages of trade (which are to prevail in case of any conflict with Maltese Civil Code provisions) as well as the special laws relating to merchant shipping.

Refund guarantee

What formalities need to be complied with for the refund guarantee to be valid?

In terms of Maltese law, any suretyship shall on pain of nullity be expressed in a public deed or a private writing (article 1233(1) of the Civil Code).

Court-ordered delivery

Are there any remedies available in local courts to compel delivery of the vessel when the yard refuses to do so?

It is possible for the shipowner to request the local courts to order specific performance under the shipbuilding contract.

Under the general provisions of sale, if the seller fails to make delivery at the time agreed upon, the buyer may demand that he or she be placed in possession of the thing sold, provided the delay has been caused solely by the seller (article 1385 of the Civil Code).

Defects

Where the vessel is defective and damage results, would a claim lie in contract or under product liability against the shipbuilder at the suit of the shipowner; a purchaser from the original shipowner; or a third party that has sustained damage?

Maltese law provisions relating to liability for defective goods do not automatically apply in a newbuilding contract regulated by Maltese law although the contracting parties are free to agree and insert provisions as to product liability in case of defects in the ship in the shipbuilding contract.

Under general principles of civil law, the seller is bound to warrant the vessel sold against latent defects that render it unfit for the use for which it is intended or that diminish its value to such an extent that the buyer would not have bought it or would have tendered a lesser price had he or she been aware of them (article 1424 of the Civil Code). By mutual agreement of the contracting parties, any of the above warranties may be excluded in the shipbuilding contract.

Furthermore, in terms of the law of tort, every person is responsible for the damages that occur through his or her fault (article 1031 of the Civil Code). The shipowner and any third party that has sustained damage are protected by Maltese law.

Ship registration and mortgages

Eligibility for registration

What vessels are eligible for registration under the flag of your country? Is it possible to register vessels under construction under the flag of your country?

Pleasure boats, commercial yachts, merchant ships, pontoons, barges, floating establishments, installations or structures and oil rigs are all eligible for registration as Maltese vessels. A ship of less than six metres in length is not eligible for registration under the Maltese flag.

As a rule, merchant ships that are 25 years old and over are not eligible for registration under the Maltese flag. Merchant ships that are 15 years old and over but less than 25 years may be registered under the Maltese flag following the satisfactory outcome of a pre-registration inspection by an authorised flag inspector. The registration of ships of 10 years and over but less than 15 years is subject to a satisfactory inspection by an authorised flag inspector within one month before registration (Merchant Shipping Notice No. 127 Rev 1 - Guidelines for the ascertainment of seaworthiness of vessels being registered as Maltese ships).

It is possible to register a vessel under construction under the Maltese flag. In such case, the requirements relating to surveying of the vessel and the declaration of ownership when the builders have not yet effected delivery to the owners are suspended until construction of the vessel or until delivery of the vessel is complete. It is also possible to register a Maltese mortgage over a ship that has been registered under the Maltese flag as a ship under construction, as long as the declaration of ownership requirement has been satisfied.

Who may apply to register a ship in your jurisdiction?

To be eligible for registration under the Maltese flag, according to article 4 of the Merchant Shipping Act (MSA), a vessel is to be wholly owned by:

  • citizens of Malta;
  • bodies corporate established under and subject to the laws of Malta, having their principal place of business in Malta or having a place of business in Malta and satisfying the minister responsible for shipping that they can and will ensure due observance of the laws of Malta relating to merchant shipping; or
  • such other persons as the minister may by regulations prescribe.

By virtue of the Ships Eligible for Registration Regulations 2003 (SL 234.23), a citizen of the European Union or of the European Economic Area (EEA) or of Switzerland residing in Malta, as well as an international owner, was declared as qualified to own a Maltese ship or a share therein. An international owner is any citizen of the European Union, the EEA or of Switzerland not residing in Malta or a non-Maltese body corporate or other entity enjoying legal personality in terms of the law under which it has been established or constituted who has appointed a resident agent in Malta. The resident agent acts as the channel of communication between the international owner and the Maltese authorities and also acts as the shipowner’s judicial representative in Malta.

A ship may also be bareboat registered under Maltese flag when it is chartered to a citizen of Malta, or to Maltese bodies corporate or other persons qualified to own a Maltese ship (as explained above).

Documentary requirements

What are the documentary requirements for registration?

Entry to the Maltese flag is through provisional registration, eventually followed by permanent registration when all the necessary requirements would have been satisfied.

An applicant must submit an application for registration as well as a declaration of ownership wherein the owner declares that the ship is free from registered encumbrances, accompanied by a scanned copy of the builder’s certificate or bill of sale on the basis of which the vessel is being registered under the Maltese flag. A copy of the present international tonnage certificate would be required as well as a confirmation that there is no halon aboard the vessel.

The Malta Transport Authority would require evidence of seaworthiness in the form of a confirmation from an approved classification society.

In order to obtain the operational certificate with which the vessel can trade, one would have to provide proof of liability insurance referring to, in particular, bunker pollution and oil pollution (as applicable), copies of valid safety statutory certificates, valid safety management certificates and a valid maritime labour certificate, as well as a copy of the long-range identification and tracking of ships conformity report. Applications must also be submitted in order to receive the relative minimum safe manning certificate and radio licence.

Permanent registration is attained by submitting the original builder’s certificate or bill of sale, the original deletion certificate, the certificate of survey and international tonnage certificate issued under the authority of Malta as well as a duly endorsed carving and marking note.

Depending on the age of the vessel, a satisfactory flag state inspection may be required as a condition for registration of the vessel under the Maltese flag.

Dual registration

Is dual registration and flagging out possible and what is the procedure?

The MSA allows for both the bareboat charter registration of foreign ships in the Maltese bareboat charter ship registry, as well as for the bareboat charter registration of Maltese ships in a foreign bareboat charter ship registry.

It is essential for the country that is to be the underlying registry or the bareboat registry for any given case to be declared to be a compatible registry with the Maltese registry by the minister responsible for shipping. To date, around 46 countries have been declared to be compatible registers with the Maltese Ship Registry.

In the case of bareboat registry, questions as to title and ownership are regulated by the underlying registry, whereas operational matters of the vessel are regulated by the bareboat registry.

In the case of a vessel that is bareboat registered in Malta, the vessel is to be bareboat chartered to a person qualified to own a Maltese ship (see question 6).

Apart from the usual requirements for the registration of a ship under the Maltese flag, there are additional requirements for registering a ship in the Maltese Bareboat Charter Ship Registry, such as a transcript of register from the underlying registry and the consent of the underlying registry and of any registered mortgagee. Within a period of 30 days following the issuance of the bareboat registry certificate of the ship under the Maltese flag, the charterer shall deliver a declaration to the Maltese ship registrar confirming that all the certificates issued by the underlying registry have been surrendered to the underlying registry.

The duration of the bareboat charter registration shall not exceed the duration of the bareboat charter or the expiry date of the underlying registration, whichever is the shorter period, but in no case for more than two years. This period of bareboat registration may be extended further for subsequent periods of a maximum of two years at a time.

Bareboat charter registration of a Maltese-registered ship in a foreign bareboat charter ship registry may be effected on obtaining the consent of the registrar of shipping to that effect. Such consent will be forthcoming upon the satisfaction of certain conditions, including an application to the Maltese registrar of shipping by the shipowner for permission to bareboat charter register the ship in a foreign registry, consent of any registered mortgagee and an undertaking by bareboat charterers in favour of the Maltese registrar of shipping confirming that the Maltese maritime flag will not be hoisted on the ship for the duration of the bareboat charter registration of the ship in the foreign registry.

Mortgage register

Who maintains the register of mortgages and what information does it contain?

The Registrar of Shipping maintains the register of vessels with all entries required to be made in terms of the MSA.

The date and time of the recording of the mortgage would result from the vessel’s register. The vessel’s register would also indicate the name and address of the mortgagee as well as a synopsis of the mortgage deed.

Any prohibition in the mortgage deed on the mortgagor from creating any further mortgages or from transferring the vessel or any share therein without the prior written consent of the mortgagee is recorded in the vessel’s register (article 39 of the MSA).

When any mandate or power of attorney has been granted by the mortgagor to the mortgagee by way of security, granting powers relating to the exercise of rights relating to the vessel or the closure of register on behalf of the registered owner, it is possible to submit such power of attorney to the registrar of shipping for registration and the vessel’s register would indicate the details of such mandate or power of attorney (article 17 of the MSA).

Limitation of liability

Regime

What limitation regime applies? What claims can be limited? Which parties can limit their liability?

The Limitation of Liability for Maritime Claims Regulations 2004 (SL 234.16) provide a regime of limitation of liability for maritime claims and give effect to the Convention on Limitation of Liability for Maritime Claims 1976 as amended by the Protocol of 1996.

The following claims, whatever the basis of liability may be, are subject to limitation of liability:

  • claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;
  • claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
  • claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;
  • claims in respect of the raising, removal, destruction or the rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;
  • claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship; and
  • claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his or her liability in accordance with this convention, and further loss caused by such measures.

The following persons are entitled to limit liability:

  • shipowners, meaning the owner, charterer, manager and operator of a seagoing ship. The liability of a shipowner shall include liability in an action brought against the vessel herself;
  • salvors, meaning any person rendering services in direct connection with salvage operations;
  • any person for whose act, neglect or default the shipowner or salvor is responsible; and
  • an insurer of liability for claims subject to limitation in accordance with the rules of the convention, to the same extent as the assured him or herself.

The act of invoking limitation of liability shall not constitute an admission of liability.

The Limitation of Liability for Maritime Claims Regulations 2004 (SL 234.16) have been amended to reflect the new limits of liability which have effect in Malta as from 8 June 2015.

Procedure

What is the procedure for establishing limitation?

The procedure for establishing limitation, where liability is alleged to have been incurred by a person entitled to limitation in respect of a claim giving rise to limitation, is for that person to make an application to the First Hall of the Civil Court for the determination of the amount of his or her liability and, where several claims are made or apprehended in respect of that liability, for the distribution of that amount rateably among the claimants.

A person claiming limitation may constitute a limitation fund by paying to the court the equivalent in euros of the number of special drawing rights to which he or she claims to be entitled to limit his or her liability in terms of the convention, together with 8 per cent interest thereon from the date of the occurrence giving rise to liability up to the date of payment to the court.

Limitation of liability may be invoked under the convention even if a limitation fund has not been constituted.

A person claiming limitation may apply to constitute a limitation fund before legal proceedings have been initiated and before such person has been required to respond to a claim that has already been commenced.

Break of limitation

In what circumstances can the limit be broken? Has limitation been broken in your jurisdiction?

A person shall not be entitled to limit his or her liability if it is proved that the loss resulted from his or her personal act or omission, committed with the intent to cause such loss, or recklessly and with the know­ledge that such loss would probably result.

We are not aware of any instance where the limitation has been broken in Malta.

In the opinion of the writers, in case limitation is broken after a fund has been established, such fund continues to subsist, with the shipowner remaining liable for any amounts due in excess of the fund. To the best of the writers’ knowledge, this point has never arisen and therefore has never been tested before a Court of Law in Malta.

Passenger and luggage claims

What limitation regime applies in your jurisdiction in respect of passenger and luggage claims?

The applicable limitation regime in Malta for passenger and baggage claims is the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the Protocol of 2002 on the carriage of passengers.

The Merchant Shipping (Carriage of Passengers by Sea) Regulations 2014 (SL 234.52) have been made pursuant to EC Regulation No. 392/2009 of the European Parliament and of the Council of 23 April 2009 on the liability of carriers of passengers by sea in the event of accidents, which, in turn, is based on the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by the Protocol of 2002 on the carriage of passengers, as well as the International Maritime Organization guidelines for implementation of the Athens Convention, adopted in 2006.

Port state control

Authorities

Which body is the port state control agency? Under what authority does it operate?

The Port State Control Section within the Technical Department of the Malta Transport Authority is responsible for the inspection of ships calling at Maltese ports or in territorial waters.

Directive 2009/16/EC on Port State Control has been implemented in Malta by the Merchant Shipping (Port State Control) Regulations (SL 234.38).

Sanctions

What sanctions may the port state control inspector impose?

If, during the inspection, the port state control inspector discovers deficiencies that are clearly a hazard to safety, health or the environment, the port state control inspector shall order the detention of the ship or shall order the stoppage of the operation during which the deficiencies are revealed.

Any detention order or order stopping a particular operation shall not be lifted until the hazard is removed or until the Malta Transport Authority has established that the ship can proceed to sea or the operation be resumed without risk to the health and safety of passengers or crew, or risk to other ships, or without there being an unreasonable threat of harm to the marine environment.

In exceptional circumstances where the overall condition is evidently substandard, the Malta Transport Authority may also suspend the inspection of that ship until steps have been taken to bring the ship in line with international conventions. In the meantime, such ship shall be considered as detained.

Where deficiencies cannot be rectified in Malta, the Malta Transport Authority may allow the ship concerned to proceed without undue delay to the appropriate repair yard nearest to the port of detention as chosen by the master and the authorities concerned, subject to any conditions determined by the flag state and the Malta Transport Authority being complied with.

The Malta Transport Authority is responsible for ensuring that no access to any port in Malta shall be granted if a particular ship has been detained for a third time within a specified period of time and where a refusal of access has been issued by a state signatory to the Paris Memorandum of Understanding (Paris MoU).

A ship runs the risk of being permanently refused access to any port and anchorage within Paris MoU territories in case of a subsequent detention in a port or anchorage within those territories after the third refusal of access.

Appeal

What is the appeal process against detention orders or fines?

The owner or operator of a ship or his or her representative in Malta may appeal against a decision for detention or refusal of access taken by the Malta Transport Authority by means of an application before the Court of Appeal (Inferior Jurisdiction). Such appeal is to be filed within 20 days of the service of the detention order or stoppage of operation or the day of refusal of access, as applicable, and shall be served on the Malta Transport Authority, which shall file a reply within 10 days of notification. The court may award the owner compensation in respect of actual loss suffered by him or her in consequence of the detention or refusal of access. It is up to the owner or the operator to satisfy the court that the matter did not constitute a valid basis for the relevant inspector’s opinion and that there were no reasonable grounds for the inspector to form that opinion. The court is to state whether there existed a valid basis or otherwise for the detention order or refusal of access. Where the court concludes that the matter in question did not constitute a valid basis for the inspector’s opinion, the court shall either cancel the detention order or refusal of access or shall affirm the order with any modifications that it deems fit.

Classification societies

Approved classification societies

Which are the approved classification societies?

By virtue of Merchant Shipping (Ship Inspection and Survey Organisations) Regulations, SL 234.37, the criteria in accordance with which classification societies may be authorised for the purpose of implementation of Directive 2009/15/EC are prescribed.

The following are all recognised classification societies by the Malta Transport Authority:

  • American Bureau of Shipping;
  • Bureau Veritas;
  • China Classification Society;
  • Class NK;
  • Croatian Register of Shipping;
  • DNV-GL;
  • Indian Register of Shipping;
  • Korean Register of Shipping;
  • Lloyd’s Register of Shipping;
  • Polish Register of Shipping;
  • Registro Italiano Navale; and
  • Russian Maritime Register of Shipping.
Liability

In what circumstances can a classification society be held liable, if at all?

A classification society may be held liable in tort or contractually (assuming that the contract provisions do not seek to limit or exclude liability).

In the absence of any agreement between the parties and in the event that Maltese law had to apply, the principle insofar as tort is concerned is that every person shall be liable for damage that occurs through his or her fault (article 1031 of the Civil Code). The standard used in assessing whether a person is at fault is the prudence, attention and diligence of a bonus paterfamilias.

A person may also be held liable when he or she, with or without intent to cause injury, voluntarily or through negligence, imprudence or lack of attention, is guilty of an act or omission constituting a breach of the duty imposed by law.

Any classification society that is recognised by the Maltese administration is to have its working relationship with the Maltese administration set out in writing, listing the specific duties and functions assumed by that particular organisation. This agreement must include at least the provisions of financial liability laid down in Directive 2009/15/EC concerning liability from a marine casualty where:

  • the Malta Transport Authority, as a flag administration, had to be held liable by a court of law or through arbitration procedures and had to be ordered to compensate any injured parties for loss of or damage to property or for personal injury or death; and
  • the court had to find that the loss, damage, injury or death was caused by the recognised organisation carrying out inspection or survey duties on behalf of the flag administration.

In such case, the recognised classification society is liable to pay financial compensation to the flag administration for any wilful act of omission or gross negligence or negligent or reckless act or omission of the recognised classification society or its employees or agents or persons acting on its behalf giving rise to such loss, damage, injury or death.

Collision, salvage, wreck removal and pollution

Wreck removal orders

Can the state or local authority order wreck removal?

Where there is any wreck on or near the coasts within the territorial jurisdiction of Malta that the minister responsible for shipping believes is or is likely to become an obstruction or danger to navigation, then the minister may take possession of, remove or destroy the wreck, as well as sell the wreck and any property recovered from it in order to be reimbursed for the expenses related to wreck removal, subject to any surplus of funds being held for the benefit of those persons entitled thereto (article 339 of the MSA).

International conventions

Which international conventions or protocols are in force in relation to collision, wreck removal, salvage and pollution?

The Convention on the International Regulations for Preventing Collisions at Sea 1972, is given force of law in Malta through the Merchant Shipping (Prevention of Collisions) Regulations, SL 234.20. The aforesaid Collisions Convention shall apply to all Maltese ships and to all other ships while they are in Maltese waters as determined by the convention.

The Nairobi International Convention on the Removal of Wrecks 2007 is part of Maltese law in virtue of the Merchant Shipping (Wreck Removal Convention) Regulations, SL 234.53. These regulations apply to all Maltese ships wherever they may be and to all other ships while they are in Maltese waters, including Maltese territorial waters.

Malta is not a party to the International Convention on Salvage 1989. There are some salvage provisions in the MSA.

The International Convention for Pollution from Ships 1973 (MARPOL), as amended by the 1978 protocol, is part of Maltese law through the Merchant Shipping (Prevention of Pollution from Ships) Regulations 2004 (SL 234.32). MARPOL Annex IV relating to prevention of pollution by sewage and MARPOL Annex VI relating to prevention by air pollution have also been implemented in Malta (SL 234.47 and SL 234.33).

Malta has acceded to the International Convention on Civil Liability for Oil Pollution Damage 1969, as amended by the 1992 Protocol, as well as the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971, as amended by the 1992 Protocol through the enactment of the Oil Pollution (Liability and Compensation) Act 1999, Chapter 412, which is in force in Malta.

The Bunkers Convention 2001 has been implemented in Maltese law through the Merchant Shipping (Liability for Bunker Oil Pollution Damage) Regulations 2009 (SL 234.46).

Maltese registered vessels as well as any vessels that enter a Maltese port are required to comply with anti-fouling legislation in terms of EU law.

Salvage

Is there a mandatory local form of salvage agreement or is Lloyd’s standard form of salvage agreement acceptable? Who may carry out salvage operations?

There is no mandatory local form of salvage agreement applicable in Malta, and the parties are at liberty to employ any form of contract, including the Lloyd’s standard form, which would be the approach in practice. Neither is there any requirement for a contract to be entered into in order to give rise to a legitimate claim for customary or traditional salvage, although a contract would, of course, have evidentiary value, leaving open only the issue of quantum. There is no restriction under law as to who may carry out salvage operations.

Ship arrest

International conventions

Which international convention regarding the arrest of ships is in force in your jurisdiction?

Malta is not a signatory to either of the 1952 and 1999 Arrest Conventions. Ships are arrested in Malta by a warrant of arrest issued on any one of the grounds listed in article 742B of the Code of Organisation and Civil Procedure giving rise to the in rem jurisdiction of the Maltese courts. These include all maritime claims recognised under the Arrest Conventions.

Claims

In respect of what claims can a vessel be arrested? In what circumstances may associated ships be arrested? Can a bareboat (demise) chartered vessel be arrested for a claim against the bareboat charterer? Can a time-chartered vessel be arrested for a claim against a time-charterer?

A total number of 25 maritime claims giving rise to in rem jurisdiction are provided for under paragraphs (i) to (xxv) of article 742B of the Code of Organisation and Civil Procedure. These closely follow the British Supreme Court Act 1981, but also incorporate both Arrest Conventions of 1952 and 1999. The basic claims may be summarised as follows:

  1. claims to possession, ownership or title to a ship;
  2. questions arising between co-owners as to the ownership, possession, employment or earnings of a ship;
  3. claims in respect of a mortgage or hypothec or charge on a ship;
  4. claims arising out of a contract of sale;claims for damages received by a ship;
  5. claims for damage caused by a ship;
  6. claims for loss of life or personal injury caused by a ship;
  7. claims for loss or damage to goods carried in a ship;
  8. claims arising out of an agreement for the carriage of goods or use or hire of a ship;
  9. claims for salvage;
  10. claims for damage to environment by a ship;
  11. claims relating to wrecks;
  12. claims for towage;
  13. claims for pilotage;
  14. claims for supplies or services rendered to a ship;
  15. claims for construction, repair, conversion or equipping of a ship;
  16. claims for port, dock or harbour dues;
  17. claims by crew for wages or repatriation;
  18. claims for disbursements made;
  19. claims for commissions, brokerage or agency fees;
  20. claims arising out of an act of general average;
  21. claims arising out of bottomry;
  22. claims for forfeiture of a ship;
  23. claims for insurance premiums; and
  24. claims for fees due to the registrar or tonnage dues.

No warrant of arrest may be issued if the monetary value of the claim is less than €7,000.

Because ship arrest is exclusively a lex fori issue, the vessel’s flag and the law governing the merits of the claim have no relevance whatsoever in regard to the grounds on which a vessel can be arrested. However, this only holds true with regard to ship arrest taken out in the context where proceedings on the merits of the claim are to be brought before the Maltese courts. In cases where arrest is possible in security of foreign process (see question 30), then the in rem jurisdiction of the Maltese courts is not a relevant factor and the law governing the merits of the claim would assume relevance.

In cases concerning any one of the maritime claims listed in (i), (ii) and (iii) above, an action in rem may only be brought against that ship in connection with which the claim arises.

In all other cases concerning the remaining maritime claims listed in (iv) to (xxv), an action in rem may be brought against that ship, where the person who would be liable on the claim for an action in personam (the relevant person) is, when the cause of action arose, an owner or charterer of, or is in possession or in control of, the ship and if, at the time when the action is brought, the relevant person is either an owner or beneficial owner of that ship or the bareboat charterer of it. In such cases, an action in rem may also be brought against any other ship of which, at the time when the action is brought, the relevant person is the owner or beneficial owner as regards all shares in it.

In these cases, therefore, sister ship and associated ship arrest is possible.

The requirement that the relevant person is the owner or beneficial owner of the particular ship or the bareboat charterer of it at the time when the action is brought does not apply in regard to those maritime claims secured by a special privilege in accordance with article 50 of the MSA, which survive the voluntary sale of the vessel by up to one year.

Maritime liens

Does your country recognise the concept of maritime liens and, if so, what claims give rise to maritime liens?

Although the concept of a maritime lien is not recognised as such under Maltese law, the MSA recognises a number of special privileges on vessels. These survive for one year following the voluntary sale of the vessel concerned (thereby assuming the droit de suite character of maritime liens), and are also relevant in the context of ranking of creditors.

Maltese law also confers a possessory lien over the ship in favour of any ship repairer, shipbuilder or other creditor into whose care and authority such ship has been placed for the execution of works or other purposes. This lien entitles the creditor to retain possession over the ship on which he or she has worked until he or she is paid the debts due to him or her for such building, repairs or activity. The possessory lien is extinguished upon the voluntary release from the custody of the creditor.

The claims that give rise to the aforementioned special privilege on vessels are as follows:

  1. judicial costs incurred in respect of the sale of the ship and the distribution of the proceeds thereof;
  2. fees and other charges due to the registrar of Maltese ships arising under the MSA;
  3. tonnage dues;
  4. wages and expenses for assistance, recovery of salvage, and for pilotage;
  5. the wages of watchmen, and the expenses of watching the ship from the time of her entry into port up to the time of her sale;
  6. rent of the warehouses in which the ship’s tackle and apparel are stored;
  7. the expenses incurred for the preservation of the ship and of her tackle, including supplies and provisions to her crew incurred after her last entry into port;
  8. wages and other sums due to the master, officers and other members of the vessel’s complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
  9. damages and interest due to any seaman for death or personal injury and expenses attendant on the illness, hurt or injury of any seaman;
  10. monies due to creditors for labour, work and repairs previously to the departure of the ship on her last voyage, provided the debt has been contracted directly by the owner of the ship, or by the master, or by an authorised agent of the owner;
  11. ship agency fees due for the ship after her last entry into port, in accordance with port tariffs, and any disbursements incurred during such period not enjoying a privilege in paragraphs (i) to above, although in any case for a sum in the aggregate not exceeding 4,000 units;
  12. monies lent to the master for the necessary expenses of the vessel during her last voyage, and the reimbursement of the price of goods sold by him or her for the same purpose;
  13. monies due to creditors for provisions, victuals, outfit and apparel, previously to the departure of the ship on her last voyage: provided that such privilege shall not be competent where the debt has not been contracted directly by the owner of the ship, or by the master, or by an authorised agent of the owner;
  14. damages and interest due to the freighters for non-delivery of the goods shipped, and for injuries sustained by such goods through the fault of the master or the crew;
  15. damages and interest due to another vessel or to her cargo in cases of collision of vessels; and
  16. the debt specified in article 2009(d) of the Civil Code for the balance of the price from the sale of a ship.
Wrongful arrest

What is the test for wrongful arrest?

Maltese law acknowledges, and penalises, wrongful arrest. The test for wrongful arrest is whether it is subsequently ascertained by the court that the request for the issuance of a warrant of arrest was based upon a demand maliciously made or unjustly obtained. Essentially this will be the case where the underlying claim on the basis of which the warrant of arrest is issued is malicious, frivolous or vexatious; or where the arresting party fails to bring the action on the merits within the time established by law without valid reason. In such eventuality, the court may condemn the arresting party to pay a penalty of not less than €11,600 in favour of the person against whom the warrant of arrest was issued.

Bunker suppliers

Can a bunker supplier arrest a vessel in connection with a claim for the price of bunkers supplied to that vessel pursuant to a contract with the charterer, rather than with the owner, of that vessel?

Owing to the requirement of underlying in personam liability, this would only be possible in the event that the charterer who contracted the bunkers happens to be the bareboat charterer of the vessel, and then always provided the vessel is arrested while still under bareboat charter.

However, if at the time the action is brought the charterer were to have become the owner or beneficial owner of that same vessel or the bareboat charterer of it, then it would become possible for the bunker suppliers to arrest that vessel.

Security

Will the arresting party have to provide security and in what form and amount?

The arresting party is not required to provide security in conjunction with the arrest. However, the person whose vessel has been arrested may request the court, on good cause being shown, to order that the party requesting the warrant of arrest puts up sufficient security for the payment of the penalty, damages and interest, in an amount being not less than €11,600 within a time to be fixed by the court; and in default to rescind the warrant. Security must be provided either in cash or by local bank guarantee.

How is the amount of security the court will order the arrested party to provide calculated and can this amount be reviewed subsequently? In what form must the security be provided? Can the amount of security exceed the value of the ship?

For the vessel to be released, the arrested party would have to deposit the amount of the claim as security. Such amount would only be available (partially or in full) to the arresting party in case of a successful outcome of the case on the merits. Security must be provided either in cash or by local bank guarantee. There is no provision for subsequent review of the security put up by the arrested party. Since the security must be related to the value of the claim, then it follows that the amount of security could potentially exceed the value of the ship, saving any possible remedy on the part of the arrested party to contest the warrant of arrest on grounds permitted by law, for example, if it is shown that the amount claimed is not prima facie justified or is excessive.

Formalities

What formalities are required for the appointment of a lawyer to make the arrest application? Must a power of attorney or other documents be provided to the court? If so, what formalities must be followed with regard to these documents?

The lawyer engaged by the arresting party, should such arresting party be non-resident in Malta, would require to be appointed as the arresting party’s special attorney in Malta unless the arresting party appoints another special attorney in Malta for the purpose. In either event, a power of attorney would be required. The power of attorney needs to be executed by an authorised representative of the arresting party but otherwise, no other formalities are required. In particular, there is no requirement for the power of attorney to be notarised, legalised or authenticated, although it might be prudent for this to be done. Malta is a signatory to the Apostille Convention. A scanned copy of the power of attorney could initially be attached to the arrest application. The original power of attorney is usually submitted at a later stage in the proceedings, usually in any proceedings on the merits. In addition to the power of attorney, it would also be advisable to attach scanned copies of the documents substantiating the claim sought to be secured by the arrest. There are no procedures for electronic filing. An arrest application may be prepared very expeditiously even on the same day instructions are given.

Ship maintenance

Who is responsible for the maintenance of the vessel while under arrest?

The Malta Transport Authority is deemed by law to be the authority having in its control the arrested vessel, and therefore it is to be considered as the official consignee responsible for the maintenance of the vessel while under arrest.

Having said that, from the moment that the warrant of arrest is served on the Authority, all expenses as may be necessary for the preservation of the arrested vessel are to be borne by the person issuing the warrant of arrest, saving his or her right to recover such expenses together with his or her claim.

Proceedings on the merits

Must the arresting party pursue the claim on its merits in the courts of your country or is it possible to arrest simply to obtain security and then pursue proceedings on the merits elsewhere?

Ships that are physically present within the territorial jurisdiction of the Maltese courts may be arrested in Malta both in security of maritime in rem claims (see question 23), as well as in security of in personam claims in those instances where the shipowner may be personally subject to the ordinary jurisdiction of the Maltese courts. In such instances, the arresting party must pursue the claim on its merits before the Maltese courts.

It is to be noted here that ship mortgages constitute executive titles under Maltese law, so that in cases concerning the enforcement of a mortgage, the mortgagee need only proceed to render such executive title enforceable according to law. This is achieved by the filing of a judicial demand in the form of an official letter accompanied by an affidavit confirming the amount due under and secured by the mortgage.

Finally, ships may also be arrested in Malta pursuant to the provisions of article 35 of Regulation (EU) No. 1215/2012, dealing with provisional including protective measures, in cases where the courts of another member state have jurisdiction as to the substance of the matter; the law also allows for ship arrest as a security measure in all cases where an arbitration clause has been stipulated in the underlying contract giving rise to the claim. However, in all these cases, the ship must always be arrested in virtue of the warrant of arrest, which remains the only way in which a ship may be arrested in Malta; and proceedings on the merits whether before the competent foreign court or arbitration must be initiated within 20 days of the date on which the warrant of arrest is issued.

Injunctions and other forms of attachment

Apart from ship arrest, are there other forms of attachment order or injunctions available to obtain security?

It is possible for any person claiming a right in or over a ship to apply for an order to the Maltese Court prohibiting any dealing with a Maltese-registered ship or any share therein for a specified time. Such order would be entered in the vessel’s register by the registrar of shipping. Any claim based on:

  • a right of ownership; or that is secured by a mortgage;
  • a registered encumbrance; or a privilege or a lien over the ship arising by operation of Maltese law or the law applicable to the claim; or
  • any other claim that gives rise to a claim in rem against a vessel under Maltese law, would give the claimant the right to apply for this caveat on the ship’s register.

Such order only affects the register of the ship and does not affect the commercial operation of the vessel. This order, which is akin to a caveat, is precautionary in nature and is not to be confused with a warrant of arrest. Such order may be revoked by the respondent depositing in court the amount of the claim in the currency indicated therein or by giving satisfactory security to the court.

Delivery up and preservation orders

Are orders for delivery up or preservation of evidence or property available?

No such orders are specifically available, although a witness may be subpoenaed to produce evidence in court during the course of a hearing or a suit.

Bunker arrest and attachment

Is it possible to arrest bunkers in your jurisdiction or to obtain an attachment order or injunction in respect of bunkers?

Pursuant to the provisions of section 2009(d) of the Civil Code, the unpaid seller of bunkers would enjoy a privilege over the bunkers themselves. Accordingly, it is possible to seize bunkers in Malta, as well as to obtain an injunction in respect thereof. There will, however, be practical difficulties in carrying this out. For instance, in connection with storage and the appointment of a consignatory to take physical possession of the seized bunkers. The claimant’s position would be stronger in the event that a reservation of ownership clause is included in the bunkers supply agreement. In appropriate cases, such warrant of seizure of bunkers could possibly be coupled with an arrest of the vessel.

Judicial sale of vessels

Eligible applicants

Who can apply for judicial sale of an arrested vessel?

Any creditor being in possession of an executive title, namely final judgment (res judicata) creditors and creditors enjoying any other executive title (see question 31) may apply for the judicial sale of an arrested vessel. The law provides for both a precautionary as well as for an executive warrant of arrest. Creditors seeking to arrest a ship in security of a claim which is not yet judicially acknowledged must have recourse to the precautionary warrant. Creditors in possession of an executive title may immediately proceed to issue an executive warrant and this is then followed up by an application for the judicial sale by auction of the arrested vessel.

Procedure

What is the procedure for initiating and conducting judicial sale of a vessel? How long on average does it take for the judicial sale to be concluded following an application for sale? What are the court costs associated with the judicial sale? How are these costs calculated?

Any creditor in possession of an executive title may apply to the court for the judicial sale by auction of the arrested ship, judicial sale by auction being one of the executive acts recognised by law. Bids are made orally. The procedure for the judicial sale could be concluded within six to eight weeks from the application for sale being filed. Following the judicial sale and the deposit of the proceeds in court, proceedings are then initiated for the ranking of creditors upon the conclusion of which the fund is distributed accordingly. Court costs associated with the judicial sale result from the Code of Organisation and Civil Procedure and are taxed by the court registrar accordingly.

Claim priority

What is the order of priority of claims against the proceeds of sale?

The order of priority of claims is as follows:

  1. judicial costs incurred in respect of the sale of the ship and the distribution of the proceeds thereof;
  2. fees and other charges due to the registrar of Maltese ships arising under the MSA;
  3. any debt secured by a possessory lien or privilege (according to article 54 of the MSA) over a ship, provided that such debt arose prior to the debts of the creditors enjoying any one of the special privileges listed in (iv) to (xi) hereunder; in the event that such debt as secured by a possessory lien or privilege arose after any of the debts of the creditors enjoying any one of the special privileges listed in paragraphs (iv) to (xi) hereunder, then such debt as secured by a possessory lien or privilege would rank immediately after such special privilege;
  4. tonnage dues;
  5. wages and expenses for assistance, recovery of salvage, and for pilotage;
  6. the wages of watchmen, and the expenses of watching the ship from the time of her entry into port up to the time of her sale;
  7. rent of the warehouses in which the ship’s tackle and apparel are stored;
  8. the expenses incurred for the preservation of the ship and of her tackle, including supplies and provisions to her crew incurred after her last entry into port;
  9. wages and other sums due to the master, officers and other members of the vessel’s complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
  10. damages and interest due to any seaman for death or personal injury and expenses attendant on the illness, hurt or injury of any seaman;
  11. monies due to creditors for labour, work and repairs previously to the departure of the ship on her last voyage, provided the debt has been contracted directly by the owner of the ship, or by the master, or by an authorised agent of the owner;
  12. ship agency fees due for the ship after her last entry into port, in accordance with port tariffs, and any disbursements incurred during such period not enjoying a privilege in paragraphs (i), (ii), (iv), (v), (vi), (vii), (viii), (ix) and (x) above, although in any case for a sum in the aggregate not exceeding 4,000 units;
  13. debts secured by a registered mortgage;
  14. monies lent to the master for the necessary expenses of the vessel during her last voyage, and the reimbursement of the price of goods sold by him or her for the same purpose;
  15. monies due to creditors for provisions, victuals, outfit and apparel, previously to the departure of the ship on her last voyage: provided that such privilege shall not be competent where the debt has not been contracted directly by the owner of the ship, or by the master, or by an authorised agent of the owner;
  16. damages and interest due to the freighters for non-delivery of the goods shipped, and for injuries sustained by such goods through the fault of the master or the crew;
  17. damages and interest due to another vessel or to her cargo in cases of collision of vessels; and
  18. the debt specified in article 2009(d) of the Civil Code for the balance of the price from the sale of a ship.

The debts secured by a possessory lien or privilege as referred to under (iii) are the debts due to any ship repairer, shipbuilder or other creditor into whose care and authority a ship has been placed for the execution of works or other purposes.

Legal effects

What are the legal effects or consequences of judicial sale of a vessel?

The legal effects of an adjudication of the arrested vessel in a judicial sale by auction are to the effect that the successful bidder obtains legal title to the vessel free of all liens and encumbrances.

The same legal effect is obtained pursuant to a court-approved private sale of an arrested vessel.

Foreign sales

Will judicial sale of a vessel in a foreign jurisdiction be recognised?

The judicial sale, or any other court-approved sale, of a vessel in a foreign jurisdiction will be recognised. If the vessel concerned happens to be a Maltese-registered vessel, then a consequence of this will be to the effect that the vessel’s Maltese registry will be closed in case of a reflagging by the new owner, or transferred in favour of the new owner should it be decided to retain the vessel’s Maltese registry.

With regard to a registered mortgage that may have encumbered a vessel sold by judicial sale in a foreign jurisdiction, the MSA provides that a registered mortgage shall attach to the ship or share therein in respect of which it is registered until it is discharged. There is an ensuing proviso to the effect that where a ship has been sold pursuant to an order or with the approval of a competent court within whose jurisdiction the vessel was at the time of the sale, the interest of the mortgagees as well as of any other creditor in the ship shall pass on to the proceeds of the sale of the ship. In this, Maltese law conforms to international standards.

However, in a recent judgment delivered by the Court of Appeal on the 8 February 2019 in the Bright Star case (Application No. 653/2018 in the records of the Executive Warrant of Arrest No. 998/2018 in the names Dr Marion Borg as special mandatory or the foreign company Jebmed SRL v MV Bright Star formerly Trading Fabrizia IMO No. 9481960), the Court refused to consider that the judicial sale by auction of the then-Maltese registered vessel Trading Fabrizia under the authority of the competent court in Jamaica where the vessel had been arrested by third-party creditors had the effect of transferring ownership of the vessel free of encumbrances, in particular free of the mortgage that has been recorded in the Maltese ship registry in favour of the applicant Jebmed SRL. This was owing to the fact that, in the deliberations of the Court of Appeal, the mortgage was not accorded similar status as an executive title in Jamaica as it was under Maltese law.

Though the case might well have been decided differently on this particular issue, had the Court not deliberated on the procedure for enforcement of foreign judgments in Jamaica to which a Maltese mortgage, being an executive title under Maltese law, was equated; and had more focus been made instead on (i) the highly privileged status enjoyed by mortgagees, including mortgagees under a foreign mortgage, under Jamaican law, mortgages being recognised as constituting maritime liens in that jurisdiction, as well as on (ii) the ranking of creditors procedures under Jamaican law pursuant to a judicial sale by auction of a ship in that jurisdiction, yet this decision of the Court of Appeal caused quite a stir in both local as well as international maritime circles, and highlighted the importance of the need for an international convention dealing with the reciprocal recognition of the legal effects of judicial sales of vessels.

International conventions

Is your country a signatory to the International Convention on Maritime Liens and Mortgages 1993?

Malta is not a signatory to the International Convention on Maritime Liens and Mortgages. However, as outlined in question 24, the MSA does recognise a number of special privileges on vessels having characteristics akin to maritime liens. The act also accords recognition to foreign mortgages, extending under principles of reciprocity equal treatment thereto as to a Maltese mortgage.

Carriage of goods by sea and bills of lading

International conventions

Are the Hague Rules, Hague-Visby Rules, Hamburg Rules or some variation in force and have they been ratified or implemented without ratification? Has your state ratified, accepted, approved or acceded to the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea? When does carriage at sea begin and end for the purpose of application of such rules?

Malta has ratified the Hague Rules, and these are in force in Malta, incorporated into domestic law in virtue of the Carriage of Goods by Sea Act 1954. The Maltese courts do, however, apply the Hague-Visby Rules when dealing with a dispute relating to a bill of lading incorporating those Rules. Malta has not yet ratified, accepted, approved or acceded to the Rotterdam Rules.

For the purpose of the application of the Hague Rules, ‘carriage of goods’ covers the period from the time when the goods are loaded to the time when they are discharged from the ship.

Multimodal carriage

Are there Conventions or domestic laws in force in respect of road, rail or air transport that apply to stages of the transport other than by sea under a combined transport or multimodal bill of lading?

With regard to road transport, the provisions of the Convention on the contract for the international carriage of goods by road (CMR), (Geneva, 19 May 1956) apply by virtue of the International Carriage of Goods by Road Act 2006, if the carriage is subject to the CMR Convention. Where air transport is concerned, the Carriage by Air (International and non-International Carriage) Regulations 2003, SL 499.24, as subsequently amended, apply the provisions of the Warsaw Convention and the Montreal Convention.

Title to sue

Who has title to sue on a bill of lading?

The holder or endorsee of a bill of lading has title to sue thereon for damages in respect of the short delivery or the non-delivery of the goods covered by the bill of lading.

Charter parties

To what extent can the terms in a charter party be incorporated into the bill of lading? Is a jurisdiction or arbitration clause in a charter party, the terms of which are incorporated in the bill, binding on a third-party holder or endorsee of the bill?

The terms in a charter party can be incorporated into the bill of lading by means of an appropriate generic incorporation clause inserted therein. However, the scope of application of such incorporation clause will not extend to any arbitration clause as may be contained in the charter party, as an arbitration clause requires specific agreement. Such arbitration clause only binds the owner and the charterer as parties to the charter party, and not the third-party holder or endorsee of the bill of lading.

Where a bill of lading is issued to the charterer in respect of goods shipped by him pursuant to a charter party, the bill of lading in such a scenario merely functions as a receipt in respect of such goods and not as the contract whose terms remain contained in the charter party.

Demise and identity of carrier clauses

Is the ‘demise’ clause or identity of carrier clause recognised and binding?

There is no relevant provision in Maltese domestic law recognising or rejecting demise or identity of carrier clauses in bills of lading; and Malta does not embrace the doctrine of binding judicial precedent. The only Maltese case that we are aware of where the Court of Appeal considered, but did not apply, the demise clause or identity of carrier clause was Advocate Dr Philip Manduca nomine v Sun Maritime Limited, decided on the 26 June 2009. The court held that the ruling of the House of Lords in The Starsin [2003] UKHL 12 was substantially compatible with the system of Maltese mercantile law.

Shipowner liability and defences

Are shipowners liable for cargo damage where they are not the contractual carrier and what defences can they raise against such liability? In particular, can they rely on the terms of the bill of lading even though they are not contractual carriers?

In a chartering scenario where shipowners are not the contractual carriers, their only liability would arise in the event that they have not exercised due diligence to make the vessel in all respects seaworthy.

Where a vessel has been subcontracted by the contractual carrier, the shipowner of the subcontracted vessel may rely on the terms of the bill of lading, as appropriate, and may raise the same defences as a contractual carrier would be able to raise.

Deviation from route

What is the effect of deviation from a vessel’s route on contractual defences?

Unless the carrier is in a position to demonstrate that any deviation from a vessel’s route was a permissible one, then such a deviation will be deemed to be an infringement or breach of the contract of carriage and the carrier will be liable for any loss or damage resulting therefrom.

Deviation is permissible for the purpose of saving or attempting to save life or property at sea, as is also any reasonable deviation.

Liens

What liens can be exercised?

In terms of article 2009(c) of the Civil Code, the debt due to the carrier for the carriage of goods is a privileged debt giving rise to a special lien or privilege over the particular goods. The Commercial Code extends this special privilege or lien also to average contributions and other charges. Such special privilege or lien ceases on the expiration of 15 days from the day of delivery of the goods notwithstanding that such goods have not yet passed into the hands of third parties.

Article 50(m) of the MSA considers damages and interest due to freighters for non-delivery of the goods shipped, and injuries sustained by such goods through the fault of the master or the crew, as giving rise to a special privilege over the ship.

Delivery without bill of lading

What liability do carriers incur for delivery of cargo without production of the bill of lading and can they limit such liability?

Delivery of cargo unless against production of the relevant bill of lading would be tantamount to misdelivery. In such a scenario, the holder of the bill of lading could sue the carrier for breach of contract and the carrier would be held wholly responsible for all damages incurred without any possibility of limiting liability.

Shipper responsibilities and liabilities

What are the responsibilities and liabilities of the shipper?

If the shipper, following the receipt of the goods, exercises his or her right to demand the issuance of a bill of lading from the carrier or master or agent of the carrier, then he or she is deemed to have guaranteed in favour of the carrier as at the time of shipment the accuracy of the marks, number, quantity and weight as furnished by him; and the shipper will be obliged to indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars.

The shipper is also responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause with the act, fault or neglect of the shipper himself, his or her agents or his or her servants.

Shipping emissions

Emission control areas

Is there an emission control area (ECA) in force in your domestic territorial waters?

Although there is no emission control area in force in Maltese territorial waters, Malta imposes strict requirements for bunker fuel in Maltese territorial waters in accordance with Malta’s obligations under Council Directive 1999/32/EC of 26 April 1999 relating to a reduction in the sulphur content of certain liquid fuels and amending Directive 93/12/EC.

Sulphur cap

What is the cap on the sulphur content of fuel oil used in your domestic territorial waters? How do the authorities enforce the regulatory requirements relating to low-sulphur fuel? What sanctions are available for non-compliance?

The use of marine fuels with a sulphur content exceeding 0.1 per cent m/m by ships at berth in ports in Malta is prohibited. Furthermore, the placing on the market of marine gas oils with a sulphur content exceeding 0.1 per cent m/m is prohibited.

The Malta Resources Authority is obliged and empowered to obtain samples and analyse the sulphur content of marine fuel for onboard consumption while being delivered to ships and in tanks, where feasible, as well as in sealed bunker samples on board ships. The Malta Resources Authority can also inspect ships’ logs and bunker delivery notes to check the documentation of the sulphur content of marine fuels. Sampling is to take place with sufficient frequency and in sufficient quantities in order that the samples will be truly representative of the fuel examined and of the fuel being used by ships while in relevant sea areas and ports.

Non-compliance with the Quality of Fuels Regulations, SL 423.29 is tantamount to a criminal offence. The offender may be sentenced to a fine or imprisonment or to both fine and imprisonment. Where any person is found guilty of committing an offence in terms of the aforesaid regulations by means of a vehicle, the owner of the vehicle is held liable in the same manner and degree, with the added possibility of such person being ordered to pay for the expenses incurred by the public entities and having the relevant permit issued by the public entity revoked and furthermore there is the risk of the vessel, as the corpus delicti, being confiscated.

Ship recycling

Regulation and facilities

What domestic or international ship recycling regulations apply in your jurisdiction? Are there any ship recycling facilities in your jurisdiction?

EU Regulation No. 1257/2013 on ship recycling is directly applicable in Malta. In addition, the Merchant Shipping (Ship Recycling ) Regulations establishing a system of penalties for failing to comply with the obligations set out in the aforesaid EU Recycling Regulation (SL 234.56) have been adopted. There are no ship recycling facilities in Malta.

Jurisdiction and dispute resolution

Competent courts

Which courts exercise jurisdiction over maritime disputes?

Malta does not have a specialised admiralty court, so the ordinary civil courts exercise jurisdiction over maritime disputes. Typically, the competent court would be the First Hall of the Civil Court, which is vested with jurisdiction to entertain claims whose monetary value exceeds €11,646.87. Lesser claims would fall within the competence of the Court of Magistrates, but it is to be noted that no warrant of arrest may be sued for, and hence no action in rem may be instituted, for any claim being less than €7,000. In recent times the incidence of ship arrests and maritime disputes has risen considerably, so that the courts have become much more familiar with such cases.

The Malta Arbitration Centre also handles international arbitrations, including maritime disputes.

Service of proceedings

In brief, what rules govern service of court proceedings on a defendant located out of the jurisdiction?

Maritime claims, which are usually brought forward by an action in rem against the vessel being physically present within the territorial jurisdiction of the Maltese courts, do not present any particular problem with regard to service of process. All relevant warrants and judicial acts may be served either upon the master of the vessel or its local agents.

Service of process in claims that might be advanced by an action in personam against the owners of the vessel would depend upon whether the owners are be resident in an EU member state or not. If resident in an EU member state, then service is effected through the Office of the Attorney General in Malta (as the receiving or transmitting agency) pursuant to Council Regulation (EC) No. 1348/2000 of 20 May 2000 on the Service in the Member States of Judicial and Extrajudicial Documents in Civil or Commercial Matters. If resident outside the European Union, then service is effected upon curators appointed by the court to represent the interests of the foreign non-resident owners.

In all cases, warrants of arrest are always served upon the master representing the vessel, and in his or her absence upon the local agent of the vessel. The Malta Transport Authority, which functions as official consignee in such cases, is also always under pain of nullity to be indicated as such in the warrant of arrest, and is also to be notified therewith.

In the case of proceedings initiated in Malta against an EU citizen (other than a Maltese citizen) not resident in Malta or a non-Maltese company in whose name a vessel is or was registered under the Maltese flag (an international owner), such international owner shall be deemed to have submitted to the jurisdiction of the Maltese courts for any action in connection with the ship while it is or was so registered. In terms of Maltese law, the resident agent acts as the judicial representative of the international owner for proceedings in Malta.

Arbitration

Is there a domestic arbitral institution with a panel of maritime arbitrators specialising in maritime arbitration?

There is an established Malta Arbitration Centre, which also handles international arbitrations, that has a panel of maritime arbitrators specialising in maritime arbitration. Only a handful of maritime arbitrations have been handled by the Malta Arbitration Centre to date.

Foreign judgments and arbitral awards

What rules govern recognition and enforcement of foreign judgments and arbitral awards?

With regard to foreign judgments, once again the answer to this question depends entirely upon whether the foreign judgment concerned was delivered by a court within an EU member state or not. In the former instance, Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2102 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, being the applicable EU Regulation, will apply. In the latter case, the ordinary procedural rules for the recognition and enforcement of foreign judgments enshrined in article 826 of the Code of Organisation and Civil Procedure will apply. Essentially, an application is required to be made to the competent court in Malta containing a demand that the enforcement of such judgment be ordered, and this is acceded to following certain judicial inquiries.

Foreign arbitration awards, being awards to which any of the following treaties, namely the Protocol on Arbitration Clauses (Geneva 1923), the Convention on the Execution of Foreign Arbitral Awards (Geneva 1927) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958), are applicable, shall upon their registration by the Malta Arbitration Centre, be enforced by the courts of Malta in the same manner as if such awards were delivered in domestic arbitration. Such awards, therefore, when registered, are enforceable as an executive title, thereby allowing the award creditor to issue any executive acts against the award debtor including an executive warrant of arrest against a vessel and an application for judicial sale by auction in respect of an arrested vessel.

Asymmetric agreements

Are asymmetric jurisdiction and arbitration agreements valid and enforceable in your jurisdiction?

We are not aware of any case where the Maltese courts have had opportunity to pronounce themselves on the validity and enforceability of unilateral jurisdiction clauses. However, we would be of the view that in such cases, the courts would uphold the principle of pacta sunt servanda.

Breach of jurisdiction clause

What remedies are available if the claimants, in breach of a jurisdiction clause, issue proceedings elsewhere?

The defendant would have to raise as part of their defence in the foreign jurisdiction the fact that proceedings have been instituted in a foreign jurisdiction in breach of a jurisdiction clause. Ultimately, it would be up to the lex fori as to whether to uphold such defence.

What remedies are there for the defendant to stop domestic proceedings that breach a clause providing for a foreign court or arbitral tribunal to have jurisdiction?

The defendant would bring to the attention of the court that there exists between the parties a clause providing for a foreign court or arbitral tribunal to have jurisdiction. It is expected that the court would stay proceedings and give any order or direction which it deems fit.

Limitation periods for liability

Time limits

What time limits apply to claims? Is it possible to extend the time limit by agreement?

Prescription is generally regulated by the Civil Code, as well as by the Commercial Code, which contains provisions dealing with prescription in certain commercial matters, although particular prescriptive periods are also stipulated in other special laws such as the Carriage of Goods by Sea Act. As a general rule, unless a specific period of prescription applies to any specific category of claim, contractual claims are time-barred after five years, whereas claims in tort not arising from a criminal offence are time-barred after two years from the date on which the relevant action could be exercised.

The law does, however, provide for a number of particular periods of prescription. Thus, by way of example, under the Commercial Code the following actions are barred after one year:

  • for payment of freight, from the completion of the voyage;
  • for the payment of victuals supplied to seamen by order of the master, from the date of such supply;
  • for the payment of timber and other things necessary for the construction, equipment and provisions of a ship, from the date on which such timber or other things have been supplied;
  • for the payment of wages of workmen and for work done, from the completion of their work or the delivery of the work; and
  • for the delivery of goods, from the arrival of the vessel.

The Carriage of Goods by Sea Act imposes a time limit of one year from the discharge of the cargo for the consignee to file a claim against the issuer of a bill of lading.

It is generally possible to interrupt prescription by the filing of a judicial act, unless the prescriptive period concerned be a peremptory one, as is the case for instance with regard to the particular prescriptive periods applicable under the Commercial Code and the Carriage of Goods by Sea Act.

It is not possible to extend time limits specified by law for the bringing forward of an action by agreement. However, once a precautionary warrant of arrest is filed, it is possible for the arrested party to concede in favour of the arresting party further time for the bringing forward of the action on the merits by filing an appropriate minute in the records of the warrant.

Court-ordered extension

May courts or arbitral tribunals extend the time limits?

Courts or arbitral tribunals cannot extend the time limits prescribed by law for the filing of a claim, although upon good cause being shown a court may allow further time to a contumacious defendant to file defence pleas in contestation of a claim.

Miscellaneous

Maritime Labour Convention

How does the Maritime Labour Convention apply in your jurisdiction and to vessels flying the flag of your jurisdiction?

The Maritime Labour Convention has been implemented in Malta through the publication of Merchant Shipping (Maritime Labour Convention) Rules 2013.

The rules apply to all Maltese seagoing ships wherever they may be and to all other ships as determined by the Maritime Labour Convention while they are in Maltese ports and to all seafarers serving on board such ships.

The rules do not apply to Maltese-flagged vessels that are fishing vessels, ships of traditional build, small ships that navigate exclusively in internal waters or waters closely adjacent to Malta, yachts in non-commercial use and warships or naval auxiliaries.

Relief from contractual obligations

Is it possible to seek relief from the strict enforcement of the legal rights and liabilities of the parties to a shipping contract where economic conditions have made contractual obligations more onerous to perform?

No, it is not possible. The courts have consistently applied the law and contractual provisions irrespective of any economic or financial consideration.

Other noteworthy points

Are there any other noteworthy points relating to shipping in your jurisdiction not covered by any of the above?

Any creditor with an executive title may apply to the Maltese courts for the private sale of an arrested ship that is within the Maltese juris­diction in favour of an identified buyer and for a determined price. The sale of any ship in terms of this procedure gives the buyer a title which is free from all privileges and encumbrances.

Update and trends

Key developments of the past year

Are there any emerging trends or hot topics that may affect shipping law and regulation in your jurisdiction in the foreseeable future?

No updates at this time.